Friday, April 29, 2005

Bush's Social Security Proposal

Let me be among the first to congratulate President Bush on finally taking a step toward compromise on social security.

The bottom line is that if social security is expending more than it can take in, there are three basic options:

1. Cut benefits 2. Raise the retirement age3. Raise taxes

The president has chosen the first, and in a rather progressive vein would impose those cuts on high wage earners, while leaving lower wage earners' benefits the same.

I would argue that the second is a good option too, as SS was designed for a population that mostly died before they could collect, so it wouldn't have been rational for most people to save for retirement; it was insurance against growing old. The retirement age of 65 was initially proposed by Otto von Bismark when he asked his actuaries what age to pick for retirement benefits he could promise the people but would not have to pay as most people would be dead by then. With today's life expectancy it is rational to save, and people should do so if they would like to retire at an age almost a decade before life expectancy. Policies that make this easier, like liberalizing 401(k) rules, should advance this end.

Democrats are not happy that private accounts are still part of the president's proposal, and conservatives should not be either. The 'ownership society' mantra smacks of the mentality of using government to instill virtue into the culture; all well and good when people you like control the government, and are trying to promote a popular virtue individual responsibility. But sooner or later a religious or social movement will have political power and try to promote its agenda (some might say that's already the case). Much harm has been done throughout history in the name of promoting compassion, piety, and justice. The best stance is for government to seek to promote those ends in the culture as it finds it, not to change the culture of its own volition. Government should be the servant of the culture, not its nanny.